NOTES TO THE INTERIM FINANCIAL STATEMENTS
9. LEASES (continued) 9.5 Transition to NZ IFRS 16
01 JUL 2018 $M
Operating lease commitment at 30 June 2018 as disclosed in the Group’s financial statements
40.2 30.2
Discounted using the incremental borrowing rate at 1 July 2018
Finance lease liabilities as at 1 July 2018
0.5
Recognition exemption for: Short-term leases
(0.5)
Extension options reasonably certain to be exercised
13.0
Net changes in leases
(2.3)
Lease liabilities recognised at 1 July 2018
40.9
Transition
The group applied NZ IFRS 16 from 1 July 2018 using the modified retrospective approach. Leases entered into and identified by the group include property leases, building access rights, and vehicle leases. In assessing whether an arrangement is, or contains a lease, the group considers whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the group assesses whether: • The contract involves the use of an identified asset; • The group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and • The group has the right to direct the use of the asset. On transition, the group applied the practical expedient to not recognise right- of-use assets and liabilities for short-term leases with lease terms ending within 12 months. The costs related to these leases are recognised in the profit or loss. Lease liabilities are measured at the present value of remaining lease payments, discounted at the group’s incremental borrowing rate as at 1 July 2018. The weighted-average rate applied is 4.55%. Right of use (ROU) assets are initially recognised at cost, comprising the initial amount of the lease liability less any unamortised lease incentives. ROU assets are subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In considering the lease term, the group applies judgment in determining whether it is reasonably certain that an extension or termination option will be exercised. The majority of the group’s leases are property leases. These, in the main, give the group the right to renew the leases at the end of their lease terms.
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